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What Are the Benefits of Customer Loyalty?

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  • Written By: Christina Edwards
  • Edited By: W. Everett
  • Last Modified Date: 09 September 2016
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Many successful businesses realize that there are a couple major benefits of customer loyalty. First, loyal customers are typically repeat customers. This means that these people will return to one particular company, resulting in a steady income for that business. Loyal customers also typically recommend their favorite companies to family and friends, which brings in more business.

Companies typically have a few types of customers. Some customers will head to the nearest or least expensive business, for instance, to purchase a necessary item or service. One of the benefits of customer loyalty, however, is that loyal customers will often seek out a certain company in order to purchase what they need.

Loyal customers typically make up a small percentage of a company's business. Almost half of many companies' sales, however, are due to customer loyalty. If a certain customer enjoys shopping at a particular business, she is likely to return to shop again. This is one of the benefits of customer loyalty, because these customers often provides a steady stream of income for many businesses.

Free advertising is another of the benefits of customer loyalty. Individuals who are pleased with a business' product or service are likely to recommend that business to their family members and friends. In turn, those family members and friends are likely to shop at that business. This is sometimes known as word-of-mouth marketing.

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For instance, imagine a customer named Dick frequently visits a pet store in his town, because of its friendly staff and quality products at a reasonable price. While he takes Spot for a walk on his brand new leash, he runs into Jane. When he recommends the new pet store to Jane, she decides to check it out. She then purchases a new scratching post for her cat, Puff. Due to Dick's customer loyalty, the pet store has made another sale, and has possibly gained another loyal customer.

Building customer loyalty is not typically something that just happens for a business. To reap the benefits of this loyalty, a business must usually work at it. Friendly customer service representatives are an essential part of gaining customer loyalty. Consumers who deal with rude employees at a business, for example, are more likely to take their business elsewhere and less likely to recommend that particular business to others.

Offering incentives to repeat customers is one way that many companies manage customer loyalty. To ensure that loyal consumers return, these companies are offering them something in return for their patronage. Customers who spend a certain amount of money in a particular store, for instance, can be rewarded with a free product or discounts. These types of customer loyalty schemes are quite popular, and they often keep customers returning.

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Logicfest
Post 1

And businesses often fail when they abuse that customer loyalty. We've seen that happen far too often -- a company tries to increase profits by offering cheaper goods, retailers might substitute cheaper products for ones that are more popular, etc.

It is a sad thing, indeed, to watch a company build up great customer loyalty and then waste it by getting greedy and running off those customers.

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